From tobacco king to emperor of oranges

Fearful of unsafe food and choosy about taste, customers at high-end supermarkets in Beijing and Shanghai have been snapping up a brand of oranges that costs 128 yuan (US$21.17) per five-kilo packet. All of last year’s production of 10,000 tons has been sold.

These are Chu Oranges, named after Chu Shijian, the man who grows them on the hills of Yunnan at the southwestern end of China. Chu, 85, has one of the most remarkable CVs of any entrepreneur in the country – he ran a sugar cane factory and then a tobacco company that paid more money in taxes and profits to the state than any other firm in China.

In 1997, he was sentenced to prison for accepting illegal payments. Released on medical parole in 2002, he leased 134 hectares of wasteland and started an orange farm, employing 300 people, at the age of 75. He gave his employees the best quality seeds and imported fertilizers, and fixed quality standards for each tree.

He went for taste and nutrition, quality and not quantity, and linked the income of his employees to the profits of the firm; its success has enabled them to earn thousands of yuan a year, several times the average wage for a rural worker in Yunnan.

Initially, he sold the produce locally, with output of 1,000 tons in 2006. In 2011, he launched the Chu brand. As production expanded, he used the internet to market his brand in Beijing and Shanghai. Production reached 8,600 tons in 2011 and 9,050 tons in 2012, when revenue reached 78 million yuan and post-tax profit 40 million. Last year, output reached 10,000 tons; he had pre-sold all the produce before it was harvested in the autumn.

He has found his market in wealthier consumers who are willing to pay higher prices for a brand they consider safe and nutritious. But he has declined offers to list the company on the stock market.

Chu has been portrayed in mainland media as a model on two fronts. One is a man who overcomes humiliation and prison to launch a new and successful career, despite his advanced age. The other is that, in China as in developed countries, there is money to be made out of premium foods: limited quantity of high-value brands yields better profit than the margin on many consumer goods.

Liu Chuanzhi, the founder of Lenovo, the world’s second largest computer firm, has pioneered its investment in food. It has put more than a billion yuan into Joyvio, which produces blueberries and kiwi fruit in Shandong, Sichuan, Shaanxi, Henan and Chile. The kiwi fruit is named after Liu, just as the oranges are named after Chu.

Chu became a household name as chief executive of Hong Ta Shan (Hill of the Red Pagoda), in Yuxi, Yunnan. He turned it into one of China’s top cigarette brands. During his 16 years as head, it earned 99.1 billion yuan in taxes and profits for the state, more than any other firm in the country.

He used the profits to buy state-of-the-art equipment from Japan, Germany and the United States. Visitors were dazzled to see automated machines producing thousands of cigarettes a minute and Korean robots carrying them to the warehouse – but halting if someone walked in front.

In 1994, the government named him one of the “10 great reform figures”. But, as a state employee, he earned a fraction of what he would have if Hong Ta Shan had been a private firm. He supplemented his income by taking US$1.74 million of his company’s large advertising budget.

Tipped off by an informant, a procurator charged him. In 1997, a court sentenced him to life imprisonment, later commuted to 17 years. In prison, he developed diabetes and was released on medical parole in early 2002.

Many Chinese regarded his sentence as unjust; such grey income was widespread within the tobacco industry, a state monopoly. For his contribution to the firm and Yunnan province, he deserved substantially higher compensation.

So they see the success of Chu Oranges as a just reward.

Perhaps he and Liu can inspire young Chinese to follow in their footsteps and create high-value brands of food which are as good for health as cigarettes are bad.